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With a huge leap in the value of Bitcoin from $900 to $20,000, 2017 marks a new legend in trading history. 2017 was the best year for Bitcoin trading. The year-end with $15,000 per Bitcoin. This huge volatility has been the reason for Bitcoin Evolution that has sparked new opportunities for the traders.
Bitcoin has become a new trend in the trading industry. More and more traders and the investors started trading in the Bitcoins. This helped the Experienced trader to capitalize on the Bitcoin trading market and allowed them to control the trade graph.
Bitcoin is now one of the most favourable assets that investors like to invest in. Just add some leverage and marginal trading, you can easily double your profit.
How Bitcoin Trading with Leverage Works?
Bitcoin leveraging helps the traders to get hold of a more sizable position to make more profits. And once you become an experienced trader, you can control 10 to 20 times the original amount required to open an account.
Margin in the leverage trading is referred to as the amount limit that you put down on the Bitcoin leverage trading. So, if the broker needs 2% of the total capital to open a 50:1 leverage trade, then you need to have at least 2% of the total capital in the account to open the trade.
For instance, if you want to open a leveraged trade of $100,000 and the margin value of the broker is 2%, then the minimum value that you need to have in your account will be 2% of $100,000 that is $2000.
Leverage and Margin Trading Is A Double Edge Sword
Leveraging Bitcoin Investment allows you to accomplish more with less capital investment. However, we all know that Bitcoin is a highly volatile asset, so you also need to be prepared to face the reverse. The example mentioned above clearly shows that the underleveraged trader will lose 10% of their capital if the price went against them by 10%. On the other hand, the leveraged trader will lose their 100% of their marginal value.
With that being said, you must consider all the possible risk that comes with a leveraged trading position. No matter what the brokers are assuring you, you must take your steps cautiously.
Leverage and Risk Management Strategies
When you are trading with leverage Bitcoins, you are prone to external threats. To make sure that you are not exposed to any unnecessary threats. Here are some of the points that you must know about.
Don’t bet the Farm
Regardless of how experienced you are in trading; you must treat every trade as a new potential threat to your capital. As we know that bitcoin trading is highly unstable, hence, it can go against you any moment. So, trade only that much amount that you are prepared to lose.
Use stops or most people know it as Stop Loss. It is the marginal price at which your broker is expected to stop with the trade that is in a losing position. It is very important to have marginal value for your profit and loss. This helps you not to over-commit with the losses.
The guaranteed stop is the conventional stops, but it is just that it comes with an additional twist. This helps you to stop your position at any given time. Hence, no matter how volatile your asset is, you will be able to stop when you feel you are facing any kind of crisis.
Bitcoin leveraging can really be rewarding, that is, if you have a clear understanding of it. The volatility makes sure that you gain profit more than the normal. However, it is a double-edged sword. So, with a little miscalculation, it can backfire as well.